Alaska’s Permanent Fund Dividend: A policy ripe for export

By Michael Howard, Special to the BDN•June 20, 2011 7:36 pm

In April I had the privilege of participating in a workshop in Anchorage with seven other co-authors of our forthcoming book on Alaska’s Permanent Fund Dividend, the only example in the world of a universal dividend paid to all citizens based on commonly owned natural resources, in this case the oil from Alaska’s North Slope.

The Alaska Permanent Fund was created over 30 years ago as a way to save oil revenue for the future and avoid the “resource curse,” the boom and bust cycle that afflicts many economies rich in resources. Shortly after the fund’s creation, with support from all political parties, Alaska instituted annual dividends to all residents — children included — that have averaged around $1,400 per person per year. The dividend is very popular and has contributed to Alaska’s having greater equality and a lower poverty rate than any other state.

Not conceived as a handout, the dividend embodies the idea that all Alaskans own their resources in common and every person should benefit from these resources. In the form of an unconditional cash payment, the dividend respects the freedom of each person to use it as he or she sees fit. Because everyone has a stake in the dividend, Alaskans are vigilant and hold the fund’s management accountable.

Our book explores whether this model can be used in other places and be linked to other kinds of resources. There are other sovereign wealth funds similar to the Permanent Fund, mostly in oil-rich states, but none of these currently pay dividends.

Iran is instituting what amounts to a dividend to compensate for phasing out inefficient gasoline subsidies. A dividend has been under discussion in Iraq. The CLEAR Act, an alternative cap-and-trade bill supported by Maine Republican Sen. Susan Collins and Sen. Maria Cantwell, D- Wash., includes an auction of carbon permits with most of the revenue coming back to American citizens as dividends. Under this bill the vast majority of poor and middle-class American households would be net financial gainers from this approach to reducing our carbon emissions even as the cost of fossil fuel rises.

Even relatively resource-poor states like Maine have common wealth that could form the basis of a citizen dividend. Maine has forests, fisheries and groundwater, among other assets. If users pay the full value in rent for their use of this common wealth, at least some of the revenue could come back to everyone in the form of dividends.

At the federal level, we own many things in common in addition to the atmosphere, such as the broadcasting airwaves. Imagine if, instead of these valuable assets being given away, broadcasting permits were auctioned at their full value and everyone shared the revenue.

Some would rather use such revenue for government expenditure. Alaska has had so much oil revenue that it has been able to pay a dividend, finance government and abolish income taxes. Few states are able to do this.

In my view — and in the view of the father of Alaska’s dividend, Republican Gov. Jay Hammond — it is better even in a resource-rich state to return the revenue from common wealth to the citizens and to fund government from taxes. Depositing resource revenue in a fund reduces the temptation, to which many thought Alaska succumbed before the Permanent Fund, to spend recklessly during a boom.

The existence of a dividend gives every citizen a stake in the management of our common wealth, an interest in holding managers accountable and an equal share of the common wealth that nature has given to us all. The funding of government from progressive taxation better distributes the costs of government to those most able to pay. And, as Hammond noted, eliminating income tax would “cut the one prime restraint on government spending,” the concern of citizens for how their tax dollars are spent.

A policy that conserves wealth for future generations, shares it equitably in the present, enhances individual freedom, elicits citizen vigilance and seeds money into the economy without a lot of government control should be given serious attention by policy makers at all levels. For more on the Alaska model, see the Alaska Dividend Blog at usbig.net/alaskablog.

Michael Howard is a professor of philosophy at the University of Maine and co-editor with Karl Widerquist of the forthcoming book “Exporting the Alaska Model: How the Permanent Fund Dividend Can be Adapted as a Reform Model for the World” (Palgrave MacMillan).